Getting FATCA/CRS Reporting Data Quality Right: Avoiding The Slippery Slope of Refiling

To combat tax evasion and protect the integrity of tax systems, the US introduced the Foreign Account Tax Compliance Act (FATCA) regime and more than 100 countries with their own individual nuances introduced the Common Report Standard (CRS) regime, which require financial institutions with deposit-taking, wealth management and custody footprints to gather and report detailed information regarding account holders.

Without effective data quality processes, filing organizations can find themselves on a slippery slope as they attempt to keep up with their reporting and refiling obligations, while also monitoring constant multi-jurisdictional FATCA/CRS reporting changes.

Prime examples of recent significant changes that affect data management and quality are the implementation of the US Internal Revenue Service TIN matching codes and the transition to CRS Schema 2.0 for XML filing. Both of these changes require financial institutions to achieve more granular data accuracy, raising the need for data refiling.

Refiling (aka Amend, Correct, Void) – A Steep, Slippery Incline

FATCA/CRS reporting refiling is one of the four key challenges

Along with data challenges, rules, jurisdiction nuances and 3rd party reporting, refiling is one of the four key challenges related to FATCA/CRS reporting. Institutions that fail to submit data that is complete, accurate, valid, timely, and consistent are compelled to resort to refiling. Often done manually, this process can be very tedious and time consuming and opens compliance risk.

The need for refiling is essentially driven by a lack of data quality. Organizations face significant pressure depending on whether (a) refiling is voluntary or non-voluntary, (b) the timeframe of the refiling is under a tight deadline, and (c) the solution used for FATCA/CRS reporting is automated.

Basically, there are two scenarios to refiling:

  • Voluntary: The organization realizes there is a data quality issue with a recent submission
  • Non-voluntary: Regulators find fault with the initial submission and demand a resubmission under an arbitrary timeframe, which could vary from being very tight, at two weeks, or up to two months

The approach used for refiling, whether it is voluntary or non-voluntary, must be carefully thought out to effectively tackle the many complex situations that arise. One example is refiling must accommodate changes in reportable jurisdictions. For example, in 2019, there were 70 reportable jurisdictions for country X. During the following year, three more were added and two were removed. To refile, the list of the 70 reportable jurisdictions in 2019 must be considered despite the change in numbers in 2020.

Compounding refiling complexity may be the requirement to adjust to the regulatory changes imposed under CRS Schema 2.0.

Under these scenarios, the next question is, which approach should your firm utilize?

  • Void all: Cancel the initial XML, make the necessary changes and create a new XML for the resubmission
  • Account-level refiling: All account-related details, including its Controlling Person for CRS and Substantial Owner for FATCA details (if any), is re-classified based on corrected data. An updated XML is generated automatically thereafter
  • DocRefID refiling: Regulators specify the DocRefID to correct and users have the option to correct only the affected DocRefID, without touching other details/sections of the XML file

Finding Solid Ground

Regardless of whether a refiling is voluntary or involuntary, financial institutions must have a reliable, automated, transparent process in place to quickly surface the specific data required to respond promptly to a refiling requirement. The tighter the deadlines, the more organizations have to scramble to complete the refiling obligation, which can be difficult to meet, especially if the process is being done manually. Without an automated FATCA/CRS reporting solution, many firms are unable to adequately amend, correct, void in a timely fashion.

Is it Time to Get off the Slippery Slope and Re-evaluate your FATCA/CRS Reporting Refiling Process?

Some of the anxiety plaguing financial institutions as they struggle to address issues related to refiling can be eased through using an end-to-end solution. Lacking the technology and data quality required for adequate FATCA/CRS reporting, many institutions are forced to use resource-intensive, outdated manual processes. In addition, to keep up with the constantly changing jurisdictional rules and regulations, a key prerequisite for a FATCA/CRS reporting solution is one that includes guidance from subject-matter experts who monitor and interpret the global FATCA/CRS reporting landscape.

Based on a foundation of expertise gained from extensive communication with filing institutions, regulators, and many other stakeholders, AxiomSL’s data-driven, automated, scalable FATCA/CRS reporting solution empowers organizations to meet their FATCA/CRS compliance requirements seamlessly on its ControllerView single data integrity and control platform.

Powered by TaxView, AxiomSL’s extensible data-dictionary architecture, the solution’s eligibility engine, enables firms to map volumes of diverse source-data to meet required filtration and classification specifications. Thus, the solution automates the painstaking task of classifying accounts with varying requirements and its single data-dictionary approach uniquely and efficiently handles both FATCA and CRS requirements, enabling one-time mapping, and easily accommodating non-standard schemas.

With AxiomSL, Refiling Becomes a Smooth Glide

AxiomSL’s FATCA/CRS reporting solution simplifies the complexities associated with refiling. The solution:

  • Has the capability to handle both voluntary and non-voluntary refilings (amendments, corrections, and voiding)
  • Takes into consideration the dynamics of reportable jurisdictions through an automated process
  • Provides ubiquitous data transparency and lineage, which enable users to pull relevant data for refiling and generate point-in-time datasets to satisfy internal or external audits
  • Saves users from carrying out this process manually by populating the relevant data and then automatically pulling out the data based on the initial run and putting it on the plate for users to make the necessary changes.

AxiomSL’s data-driven cloud-based platform and SaaS-enabled automated end-to-end solutions for FATCA/CRS and other regulations enable firms to efficiently position for change. Its dynamic and flexible design enables organizations to stay up to date with evolving technology and regulatory changes without need for reengineering, thus futureproofing their tax compliance program.

AxiomSL’s unique solution provides an efficient ecosystem for FATCA/CRS data management, monitoring, and reporting, enabling firms to comply confidently across all jurisdictions, reduce cost and operational burdens, and strengthen data quality and auditability.

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